Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns

Dollar, Money, Us-Dollar, Arrangement, Funds, Currency

The recent news of hedge fund and other institutional crisis events has opened many eyes as investors and traders realize the post-2008-09 global market credit bubble has extended well beyond what many people may realize. Recent news that China offered a “deferment” for Chinese corporations and state-run enterprises content with shadow banking credit/debt issues at a time when China is tightening monetary policy shows that a process, like the 2008 Lehman incident, may be setting up where institutional level credit/debt liabilities ripple through the global markets as global central banks attempt to reign in monetary policies.

This process is not likely to happen suddenly though. If this type of contraction in global monetary policy takes place, resulting in increased pressures to contain excessive credit/debt functions in the markets, then we believe the process may result in an extended 9 to 16+ months of “hit-and-miss” events leading up to a potentially bigger event. The Archegos Fund forced unwinding of trades hit the markets recently as a wake-up call.  Prior to the Archegos event, the Greensill Capital collapse shocked the global markets because of the size and scope of this failure. Now, we see Credit Suisse issuing warnings that Q1 earnings may have taken a big hit because of exposure to the Greensill and Archegos assets – which is leading to Credit Suisse attempting to put the Gupta Trading Unit into insolvency.

As they old saying goes, “shoes are dropping all around us”.

Still, my research team and I believe these incidents are somewhat isolated in today’s world and not of the scale of the 2008-09 credit crisis event but the US Dollar and Treasury Yields are starting to react as if FEAR is starting to increase in the global markets. Let’s start by reviewing what happened to the SPY and US Dollar between 2005 and 2011 to get a better understanding of how these two global market components reacted to the events leading up to the 2008-09 credit market crisis and how the US Dollar acted afterward.

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